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CROSSING ; A New Trend For The Arab Steel Companies |
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04/12/2007 15:02:10 The increase of steel production for most of the Arab steel producing companies during the past months of this year may not be the most significant event for the development of this industry which every year registers a new event. But what this increase asserts is that the Arab steel companies have gained a power through which it could abridge the power of this industry in major companies. This was due to the presence of a strong demand in the domestic markets and an increase in the ability of these companies to satisfy the growing demand, which stimulated the companies to rush in the expansion direction and do all their best to execute their expansion programs within the scheduled period of time. The year 2007 constituted for the executed projects which have come on stream a new appearance for the growth acceleration in this industry. This looks very clear in the Saudi Iron and Steel Company “Hadeed”, Qatar Steel Company, the Tuwairqi Group in Saudi Arabia and a number of other companies the expansions of which have added new production capacities which put us before a new imagination of the future of this industry. In the past, in the literatures of companies, concentration was made on the terms “growth” and “expansion”, but the new thing in 2007 is that in addition to these terms new terms have been incorporated such as “crossing”. We mean with this term the expansion of the Arab steel companies across their borders, or in other words, the entry of the Arab steel companies to other Arab markets not as an exporter of steel products or to acquire other mills by purchasing operations or entering into alliances, but as an investor aiming at setting up a new steel mill far away from its original locations. This orientation in 2007 has constituted the most significant event for the growth of the Arab iron and steel industry, definitely for some steel companies. This orientation reflects a new dynamism based on the conception of growth and expansion by setting up new projects which will contribute to having Arab-Arab companies or entities. This orientation has been represented by the announcement of Ezz Steel company from Egypt that it intends to set up a new mill in Algeria at a cost of 750 million dollars with a production which will reach at the first stage 1.5 million tons of reinforcing steel, provided that the possibility of expansion will remain outstanding as to bring the production capacity up to 3 million tons of finished products within which the flat products are expected. The most important side in the crossing of the companies beyond their borders is that they have not adopted the prevailing trend in most merging or acquisition operations endeavouring to own a bigger share in existing companies to depend on them as a base for expansion, either in the domestic market or in other markets, but they tried to strengthen the growth of this industry by setting up a new project. This reflects a principal idea that the growth comes through building new projects and not only through entering into mergers or alliances. The Arab steel companies have encouraged many Arab investments to channel the Arab financial surpluses towards entering into producing industries like the iron and steel industry. . Thus, the Arab steel industry has thereby led the direction towards the productive investment. In the same direction, the Arab steel companies are trying to have the same positive role by strengthening their presence in other Arab countries by means of setting up new projects. Perhaps the new map of the steel industry expansions will reveal within the next few years the existence of a number of Arab steel companies crossing their borders into countries other than the countries where the headquarters of these companies are not located. This will reveal the existence of a number of Arab steel companies the production capacities of each of which will exceed 5 million tons per year. At the same level of importance, we look forward to develop the kinds of the existing partnerships between the Arab steel producing companies and the raw materials producing companies, which is embodied by Qatar Steel’s obtaining of a share of up to 49.9% of the shares of the iron ore Guelb Elouge in Mauritania. Such a partnership will provide good opportunities for investing the iron ore in a country like Mauritania where the iron ore constitutes the most important future challenges which will face the steel industry, especially with the rising trend towards merging between a limited number of the iron ore producing companies which presently control 70% of the world production. Perhaps these companies will go even to be more merged in the future, which will put the iron ore market within an international monopoly of a very limited number of companies. Not only the companies which cross the borders of their countries are the companies which deserve to be the ambassador of the growth of this industry at the Arab level but also the hosting companies which support this trend and provide it with all opportunities to act freely and which constitute a basic partner in the growth process. If the race for globalization constitutes the most significant face of what we see of merging and acquisition operations in the steel industry and also in other industries in order to deepen the conception of “ A world free of borders”, we, in order to make our industry have its special position in this feverish race, are requested to develop our industry in a manner as to make it grow bigger within its atmosphere. Maybe crossing over to other countries to set up new projects is the road for this industry to grow bigger and make its engagement go beyond the borders of its domestic market into the world market by developing new projects not only by merely exporting to these markets. By this alone the Arab companies will be able to keep pace with globalization and will have its distinguished position in a world in which competition is increasing to get a bigger share in the markets. Arab Steel |
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